Insurance Surety Bonds Accepted for Mobilization Advance in EPC Contracts: NHAI

The National Highways Authority of India (NHAI) has issued a new policy circular, Policy Circular No. 3.1.41/2025, dated January 2, 2025, regarding the inclusion of provisions for accepting Insurance Surety Bonds (ISB) for Mobilization Advance in EPC (Engineering, Procurement, and Construction) contracts. This decision supersedes Policy Circular No. 18.88/2023 issued on June 13, 2023, and aligns with the directives from the Ministry of Road Transport & Highways (MoRTH) and the Department of Expenditure.

The circular addresses the inclusion of ISBs as a valid form of security for Mobilization Advance in EPC contracts. This change comes in compliance with the amendments made by the Department of Expenditure to the General Financial Rules (GFR) 2017. Specifically, the amendments allow for the use of electronic Bank Guarantees (e-BG) and Insurance Surety Bonds as acceptable instruments for Bid Security and Performance Security.

The Ministry had, in May 2023, approved the use of ISBs as a substitute for traditional Bank Guarantees in various contracts, including those related to Road Development, Toll Contracts, Ropeways, and other similar projects.

A revision of the standard documents related to EPC contracts, including the Request for Proposal (RFP) and Model Contract Agreements (MCA) will be made, to reflect this change. Annexure A and Annexure B of Policy Circular dated January 2, 2025, provides the updated formats for the implementation of this policy change.

The inclusion is expected to provide more flexibility for contractors. It also aligns with modern practices and digital financial instruments, making the process more efficient and accessible. Additionally, the move is expected to streamline the documentation and security processes, benefiting both the contractors and the government.